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Major Expenses - PersonnelMajor Expenses - Personnel Personnel is the largest cost category in the City’s budget comprising 67.8 percent of the City’s expenditures. The Personnel expense category includes salaries, overtime, health bene{ts, workers’ compensation, and pensions. Each major Personnel cost category is discussed separately below. SalariesSalaries Salaries are set through labor agreements for most employees and for several years have increased by approximately three to four percent annually. The FY 2025/26 and FY 2026/27 budgets include salary increases consistent with the City’s labor agreements. The City is in negotiations with three labor groups: Pleasanton City Employees Association (PCEA), International Association of Fire{ghters (IAFF), and Fire Battalion Chiefs. PCEA’s Memorandum of Understanding (MOU) is scheduled to expire on May 31, 2025, and IAFF and Battalion Chief MOUs are both scheduled to expire on June 30, 2025. Funding will be determined and updated once the new MOUs are {nalized and will be re|ected through the FY 2025/26 Mid-Year Budget Review process. Health BeneHealth Bene{{tsts The City’s labor agreements limit the City’s contribution to health bene{ts to the Kaiser Permanente premium rates. Annual premiums tend to |uctuate considerably. Premium rate changes are primarily based on City staff and retirees’ prior year’s utilization of Kaiser Permanente’s services. The biennial budget includes an annual increase of 7.0 percent in Kaiser Permanente premiums. The City receives health bene{t premium rates every year in April for the subsequent {scal year; thus, the FY 2026/27 Mid-term Budget will be adjusted to re|ect the actual change for that year. Workers' Compensation The budget for workers’ compensation claims is adjusted by approximately $0.2 million from FY 2024/25 to FY 2025/26 to set aside funding necessary to cover both current as well as future claim costs. Contributions to the Workers’ Compensation Fund will be gradually increased to build reserves over the next several years to ensure there is at least 70.0 percent of the claims liability available to pay future claims. PensionsPensions The City’s pension expenses have substantially increased since the Great Recession, primarily due to California Public Employees' Retirement System (CalPERS) investment losses and various changes in CalPERS policies related to calculating pension liabilities. The most signi{cant of these changes is the reduced CalPERS discount rate. In January 2017, CalPERS adopted a policy that reduced the CalPERS discount rate from 7.5 percent in FY 2017/18, to 7.0 percent in FY 2020/21, and then to 6.8 percent in FY 2021/22. CalPERS’ goal is 7Page 288 of 682